Movie Gallery's bank debt and bonds fell after the company said it would delay filing its 10K for the year ended Jan. 1, 2006 with the Securities and Exchange Commission. Its term loan "B" dropped two points to 91, while its 11% '12 bonds tumbled seven points to 46 1/4. Movie Gallery said it would delay the filing because of problems integrating the financial reporting of Hollywood Entertainment Corp., which it bought in the second quarter of 2005.
The delay was also caused by the negotiation of an amendment to its senior credit facility, which is expected to go into effect April 1. Movie Gallery sought an amendment to its $750 million term loan "B," which is led by Wachovia Securities. Interest on the term loan will be increased to LIBOR plus 5 1/4% from LIBOR plus 3 3/4%. Fifty basis points of the amendment will be payment-in-kind (CIN, 3/13). If the company's leverage ratiomeasured as total net debt relative to operating cash flowis lower than four, the interest rate will be LIBOR plus 3 3/4%. Its term loan "A" and revolving credit facility is increased to LIBOR plus 5% from LIBOR plus 2 3/4%. This rate is adjusted according to its leverage ratio.
Last week, the beleaguered video rental company reported a $546.5 million net loss for 2006, compared with a $49.5 net profit in 2005. Its fourth quarter 2005 operating results included a $527.9 million non-cash goodwill impairment. For the fourth quarter of 2005, total revenues were $676.4 million. Its same-store revenues declined 8.6% from the fourth quarter of 2004, mostly because of the decline in the overall home video rental industry. A Movie Gallery spokeswoman declined to comment.